The Metro Vancouver Real Estate Thread

[Vin]

Originally Posted by whatnext

That hissing noise you hear is the deflating Vancouver real estate bubble:

The Vancouver condo market continued to slow in July. While part of this is seasonal a trend, there’s definitely more to it this time around. Condo sales have declined each month this year, and fell to their lowest total for the month in six years.

Overall, Vancouver condo sales declined by 22% on a year over year basis. The one bedroom condo space remained the strongest, but was not immune, with sales dropping 19%. Two bedroom condo sales dipped 24%, while three bedroom sales plunged by 31%. For further context, the 427 condo sales this month was 20% below the ten year average for July...

http://vancitycondoguide.com/vancouver-condo-sales-july/

But prices continue to increase.........

[Jalapeño Chips]

Originally Posted by Vin

But prices continue to increase.........

Wrong:
http://www.cbc.ca/news/canada/british-co...o-vancouver-lowest-in-18-years-1.4771743

[Sheba]

Originally Posted by Jalapeño Chips

Wrong:
http://www.cbc.ca/news/canada/british-co...o-vancouver-lowest-in-18-years-1.4771743

Sale prices are dropping, too. According to the REBGV, the benchmark price for a detached home was $1.59 million in July, down 1.5 per cent from a year earlier and 0.6 per cent from June.

Even in the red-hot condo and townhouse markets, prices fell between June and July — though they're still well above where they were last year. The benchmark price for an apartment is now $700,500, down 0.5 per cent from June, while townhouses sit at $856,000 are down 0.4 per cent.

So now things are very slightly less overpriced...

[Alex Mackinnon]

Originally Posted by misher

Its unfortunate that propaganda has convinced the masses to support policies that are pushing us towards a recession. One example is money laundering, the NDP would tell you its bad to allow them to invest here....but in reality they just take the money somewhere else and there goes the jobs and taxes that that money would create. Another is speculation. For some reason people who buy housing as an investment are now evil, while people who buy stocks are ok. People who buy investment property generally rent it out, helping to solve the housing crisis. Their money also creates jobs, pays taxes, and helps support the real estate industry. The high costs of construction and land in Vancouver require speculation in order to push the construction of housing.

You need to understand that should the real estate industry crash (as many are hoping) we will lose a ton of jobs, a ton of taxes (goodbye all the social programs), and developers will stop building new housing. Wanting the real estate industry to crash either because you want a cheaper home or because the misery of those that own homes makes you happy is very short-sighted (which is exact what the NDP stands for).

This is coming from someone born in Vancouver with little family support who doesn't own housing. However working in an industry that relies on a strong real estate industry+a business degree helps give me some insight that is missed by others. Tbh rent is still pretty cheap in Vancouver and rental protection laws are very strong. Killing the real estate industry is just going to decrease the rental supply.

You sound like someone who's income is solely dependant on the RE industry. Believe it or not, the rest of the real economy in Vancouver is getting hosed by how screwed up our RE industry is.

It's hard to attract engineers, scientists, doctors, teachers and workers when costs of living don't match up with regional wages. People making well over $100K still find it hard to justify moving to the city because of the cost of living.

Bar none, housing costs are ridiculous due to land costs and speculation. CACs are one thing, but look at other cities in the region and tell me why their multi-family projects are still leaps and bounds above the costs of other regions. Vancouver isn't that hard to build things in, wood is cheap and abundant, concrete costs aren't any different, labourers don't actually cost that much, etc.

Believe it or not, houses and in particular rental stock got built before people started speculating on condos. Unfavourable tax schemes is all it took for rentals to stop getting built in the 70s. Developers only are building pricy condos now because cheap money has inflated the price way beyond the amount people can afford in rent. Vancouver is hardly Hong Kong after all. There is plenty of developable land nearby.

Unlike rent, purchase prices are elastic thanks to leverage, and they don't need to be founded on incomes or economic fundamentals. We've just seen a long term disconnect between what people thing money costs, and the levered morons who fuelled the bubble are going to be the first burned.

Outside of the FIRE industries, the real economy of making things, building stuff, and selling services will keep on ticking without RE making it harder to attract staff.

[WarrenC12]

Hopefully there's no huge crash. As much as some people want it, I don't think they understand the broader impacts. And if you're an NDP supporter, it will spell the end for them as well, no matter what their involvement in the actual causes.

I think a flattening out of prices, with decreases of no more than 10% a year is palatable. And we'll see where we are in a year or two. Even if prices are flat, inflation eats 2-3% of real value every year.

[whatnext]

Originally Posted by WarrenC12

Hopefully there's no huge crash. As much as some people want it, I don't think they understand the broader impacts. And if you're an NDP supporter, it will spell the end for them as well, no matter what their involvement in the actual causes.

I think a flattening out of prices, with decreases of no more than 10% a year is palatable. And we'll see where we are in a year or two. Even if prices are flat, inflation eats 2-3% of real value every year.

Wages would have to rise an awful lot to render homes remotely affordable even in that scenario.

[WarrenC12]

Originally Posted by whatnext

Wages would have to rise an awful lot to render homes remotely affordable even in that scenario.

I guess that depends on your definition of "homes" and "remotely affordable". Yes, you need to be in the top 5% if you want to raise a 4-5 person family near the urban core of a metro region.

A 50% crash would mean economic devastation that would take decades to recover from. And I say that as somebody who could weather it.

[misher]

Originally Posted by WarrenC12

I guess that depends on your definition of "homes" and "remotely affordable". Yes, you need to be in the top 5% if you want to raise a 4-5 person family near the urban core of a metro region.

A 50% crash would mean economic devastation that would take decades to recover from. And I say that as somebody who could weather it.

People who can't afford things want prices to crash, but people who know better realize this would kill our economy.

Also my coworkers have purchased places downtown for around $500,000. They saved up a ton and were very frugal to do it. Its possible to buy a condo in Vancouver on a median salary (but not a house).

Long as rent doesn't go up to what it should be (5% of property value) then I think we're safe.

[WarrenC12]

Originally Posted by misher

Long as rent doesn't go up to what it should be (5% of property value) then I think we're safe.

5%? Per what? Year? Gross? Net? Where are you digging these numbers up?

[Alex Mackinnon]

Originally Posted by misher

People who can't afford things want prices to crash, but people who know better realize this would kill our economy.

Also my coworkers have purchased places downtown for around $500,000. They saved up a ton and were very frugal to do it. Its possible to buy a condo in Vancouver on a median salary (but not a house).

Long as rent doesn't go up to what it should be (5% of property value) then I think we're safe.

Cool story bro.

Now compare what a median salary is and what what a 500 sq.ft. studio downtown costs. After tax, someone earning $60K/yr has about $40K/yr take home income. Subtract food, living expenses, utilities, other taxes, etc and they're down to about $25k/yr free cashflow unless they're very frugal.

That gives them about $1,500 for a mortgage, $400 for strata and insurance, and $200 for property tax. Unless that person has a pension plan, they're not saving for retirement. They're utterly screwed if they have any big expenses or special assessments.

Now tell me those people aren't making a miserable financial decision, despite the fact that they clearly would have to have no dependents to live in said condo and $60K isn't a bad salary for anyone under 40.

The economics of it only work if the cost of money is basically free after inflation.

---

I want the bubble economy to crash, despite being roughly able to afford a SFH in Vancouver. It's ridiculously overvalued as it is, tying up wealth in useless ways that are contrary to health of the overall economy.

[MIPS]

Originally Posted by misher

People who can't afford things want prices to crash, but people who know better realize this would kill our economy.

An economy heavily influnced by a communist dictatorship. Grow some balls and pull the trigger before they start holding more than property values hostage. All of our political parties are dysfunctional anyways so as they get voted in and out for the next decade things can get back to something similar to growth in the 90's.

[dreambrother808]

Originally Posted by misher

People who can't afford things want prices to crash, but people who know better realize this would kill our economy.

Also my coworkers have purchased places downtown for around $500,000. They saved up a ton and were very frugal to do it. Its possible to buy a condo in Vancouver on a median salary (but not a house).

Long as rent doesn't go up to what it should be (5% of property value) then I think we're safe.

Guess what? I think it’s safe to assume that the majority of Lower Mainlanders don’t care and are waiting for the crash with bated breath. You’re pissing in the wind, my friend. They know that the suffering will not be in vain and there was sadly no other option.

[casper]

I have only visited China three times over the past 10 years and each time was Shanghai for a week, business and a bit of playing tourist. So I never had a real feeling of the local market.

This is an interesting vlog by a westerner living in China on why would would not buy property in China. Interesting. If this is true I see why most people want to get buy property in Canada.

https://www.youtube.com/watch?v=PKEhnupuu98

[rofina]

Originally Posted by misher

People who can't afford things want prices to crash, but people who know better realize this would kill our economy.

Also my coworkers have purchased places downtown for around $500,000. They saved up a ton and were very frugal to do it. Its possible to buy a condo in Vancouver on a median salary (but not a house).

Long as rent doesn't go up to what it should be (5% of property value) then I think we're safe.

We own 2 places in the lower mainland.

I say bring on a crash - its long overdue.

5 years down the road it will be a net benefit to the City, of this I have no doubt.

We have so much positive driving us forward right now, film, tourism, tech, mining, infrastructure.

There could be no better time to rip the band-aid off and allow for some healing.

The desirability of this City only goes up as it becomes more affordable and more people decide to relocate instead of passing up good opportunities because of ridiculous cost of living, and lack of access to suitable housing.

[svlt]

At the expense of tens of thousands of families who suddenly become underwater on their loan and will probably spend much less locally on the economy? A crash (50% cut) is a recipe for disaster for the Canadian economy. You want more austerity measures, budget crunching and lost jobs, bring it on.

My place is worth more than double the mortgage I have on it and a crash would suit me just fine as I could finally pursue the housing upgrade I've been eyeing. But I still wouldn't wish it. A steep correction in the tune of 20%? Yeah, we could use that here.

FWIW I think any major slump would be effectively absorbed by foreign investment keen on cheap deals. This isn't a worthless market, I don't think with the geopolitical location of the city and the climate the prices would remain depressed for long at all. If it crashes here it takes out the rest of the Canadian real estate with it, because people won't pay more to live elsewhere in this country. JMO.

[misher]

Originally Posted by svlt

At the expense of tens of thousands of families who suddenly become underwater on their loan and will probably spend much less locally on the economy? A crash (50% cut) is a recipe for disaster for the Canadian economy. You want more austerity measures, budget crunching and lost jobs, bring it on.

My place is worth more than double the mortgage I have on it and a crash would suit me just fine as I could finally pursue the housing upgrade I've been eyeing. But I still wouldn't wish it. A steep correction in the tune of 20%? Yeah, we could use that here.

FWIW I think any major slump would be effectively absorbed by foreign investment keen on cheap deals. This isn't a worthless market, I don't think with the geopolitical location of the city and the climate the prices would remain depressed for long at all. If it crashes here it takes out the rest of the Canadian real estate with it, because people won't pay more to live elsewhere in this country. JMO.

We killed the foreign investment lifeline when we added in the 20% speculation tax, 3mil+ transfer tax, crackdown on foreign money, crackdown on anonymous ownership, increased international student fees a hell load (this was done at the university level), and a few other things. You also need to remember that many nations such as China are cracking down on money leaving the nation. For the past 2 years we've done our best to be anti foreign investment and its working. I suspect we are seeing some people paying the 20% tax now because they paid the deposit on property but gradually this will die out.

There's also the part leverage plays in our real estate market and economy. People are using property to secure mortgages for other property. It will greatly slow down sales and demand if assessments go down. Not to mention the taxes were relying on to support the NDP social programs in the budget will die.



Anyway I'm not trying to support a political party when I reply to this. I am ok with a mild (1-3%/year) decrease in housing prices. But there is a huge difference in the effect a mild decrease would have compared to a major one. I am fearful a major 10%+ one will lead to a depression. We have become over-reliant on the real estate market for most of our employment, taxes, and economy and its very frightening what may happen should this crash.

You need to remember that our market relies on sales and price correction is going to be incredibly slow. People will not sell their homes for less, and buyers won't buy for more than its worth, they will just wait. We rely on these property transfers, construction, developments, etc. for taxes and jobs. A healthy market relies on a high volume, when people do not buy or sell the economy dies.

We're already seeing sales slow down and developments cancel. The market will roll on just because some developments are halfway and many people have paid deposits but eventually if we don't give it some gas the wheel will stop turning. Sales are down to what they were in 2000, this is not a mild decrease, this is a frighteningly large decrease. Large decreases lead to economic upheaval and usually large scale unemployment. We needed a small decrease and we went for a home run instead which I fear will cause massive instability. The NDP's budget predicts increasing sales and taxes which does not match what has happened to the market (kind of obvious to predict that more taxes=less sales but thats the NDP for you), so they are going to run a massive deficit and I'm not sure how they will solve it. This warning has been echoed by most major real estate institutions and policy experts. Hopefully my fears do not come true.

PS: Now everyone is deferring the higher property taxes because there too angry to pay them which means theres less cashflow for the city as well.

[whatnext]

Originally Posted by misher

We killed the foreign investment lifeline when we added in the 20% speculation tax, 3mil+ transfer tax, crackdown on foreign money, crackdown on anonymous ownership, increased international student fees a hell load (this was done at the university level), and a few other things. You also need to remember that many nations such as China are cracking down on money leaving the nation. For the past 2 years we've done our best to be anti foreign investment and its working. I suspect we are seeing some people paying the 20% tax now because they paid the deposit on property but gradually this will die out.

Lifeline!? It was chain around every Canadians' neck dragging us under. The damage is irreversible. Formerly middle class homes in Dunbar which traded for around $1 million ten years ago are now permanently stuck around $3 million.

Originally Posted by misher

There's also the part leverage plays in our real estate market and economy. People are using property to secure mortgages for other property. It will greatly slow down sales and demand if assessments go down. Not to mention the taxes were relying on to support the NDP social programs in the budget will die.

You mean the part it plays in a speculative real estate market. It's pretty clear you're in the industry of pushing property.

Originally Posted by misher

Anyway I'm not trying to support a political party when I reply to this. I am ok with a mild (1-3%/year) decrease in housing prices. But there is a huge difference in the effect a mild decrease would have compared to a major one. I am fearful a major 10%+ one will lead to a depression. We have become over-reliant on the real estate market for most of our employment, taxes, and economy and its very frightening what may happen should this crash.

You need to remember that our market relies on sales and price correction is going to be incredibly slow. People will not sell their homes for less, and buyers won't buy for more than its worth, they will just wait. We rely on these property transfers, construction, developments, etc. for taxes and jobs. A healthy market relies on a high volume, when people do not buy or sell the economy dies.

We're already seeing sales slow down and developments cancel. The market will roll on just because some developments are halfway and many people have paid deposits but eventually if we don't give it some gas the wheel will stop turning. Sales are down to what they were in 2000, this is not a mild decrease, this is a frighteningly large decrease. Large decreases lead to economic upheaval and usually large scale unemployment. We needed a small decrease and we went for a home run instead which I fear will cause massive instability. The NDP's budget predicts increasing sales and taxes which does not match what has happened to the market (kind of obvious to predict that more taxes=less sales but thats the NDP for you), so they are going to run a massive deficit and I'm not sure how they will solve it. This warning has been echoed by most major real estate institutions and policy experts. Hopefully my fears do not come true.

PS: Now everyone is deferring the higher property taxes because there too angry to pay them which means theres less cashflow for the city as well.

There would be no Depression as the problem is almost unique to Vancouver, the rest of Canada has a real economy, not one built on peddling speculative property investments to offshore buyers. A severe correction is what is needed to chase speculators from the market, licking their wounds.

BTW, City Hall gets paid by the Province when taxes are deferred.

[WarrenC12]

Originally Posted by whatnext

There would be no Depression as the problem is almost unique to Vancouver, the rest of Canada has a real economy, not one built on peddling speculative property investments to offshore buyers. A severe correction is what is needed to chase speculators from the market, licking their wounds.

BTW, City Hall gets paid by the Province when taxes are deferred.

Yes that is the additional risk we have out here. If there is a localized crash and recession, Ottawa doesn't change monetary policy to adapt. They would if the problem happened in Ontario. It's also not an industry (like car manufacturing) that they love to bail out to the tune of hundreds of millions. We just have to wait it out.

[Vin]

Originally Posted by Jalapeño Chips

Wrong:
http://www.cbc.ca/news/canada/british-co...o-vancouver-lowest-in-18-years-1.4771743

Look at the last chart and the general trend (not the fluctuations):

http://vancitycondoguide.com/vancouver-condo-sales-july/

[rofina]

Originally Posted by svlt

At the expense of tens of thousands of families who suddenly become underwater on their loan and will probably spend much less locally on the economy? A crash (50% cut) is a recipe for disaster for the Canadian economy. You want more austerity measures, budget crunching and lost jobs, bring it on.

My place is worth more than double the mortgage I have on it and a crash would suit me just fine as I could finally pursue the housing upgrade I've been eyeing. But I still wouldn't wish it. A steep correction in the tune of 20%? Yeah, we could use that here.

FWIW I think any major slump would be effectively absorbed by foreign investment keen on cheap deals. This isn't a worthless market, I don't think with the geopolitical location of the city and the climate the prices would remain depressed for long at all. If it crashes here it takes out the rest of the Canadian real estate with it, because people won't pay more to live elsewhere in this country. JMO.

There will be hurt, I will be one of the people licking their wounds.

But its pretty clear to me that 25% + needs to happen to bring some sort of semblance of sanity back.

The price run up is also at the expense of thousands of families. The price run up is certainly not only positive.